Simsek: Disinflation to continue despite geopolitical shocks

Treasury and Finance Minister Mehmet Simsek said on Friday that Türkiye's economic program remains firmly on track despite recent geopolitical and energy shocks, with the disinflation process set to resume within months and return to its intended trajectory. Speaking at the 69th General Assembly of the Banks Association of Türkiye at the Istanbul Finance Center, Simsek emphasized that price stability remains the government's core priority, while fiscal discipline and structural reforms will continue supporting efforts to bring inflation permanently down to single digits. "Despite shocks, what matters is progress. What matters to us is the direction of travel," Simsek said. "From that perspective, with a delay of a few months, the disinflation process will continue again and get back on track."

Fiscal discipline withstands earthquake spending

Simsek stated that there was currently no concern over fiscal discipline despite earthquake-related expenditures, noting that Türkiye maintains a stronger fiscal position than many comparable countries. The budget deficit target stands at 3.5% of gross domestic product, though actual performance will "very likely" exceed that projection, he said. The minister also highlighted that the current account deficit — long viewed as one of Türkiye's primary economic vulnerabilities — has become manageable, with the annual shortfall expected to close at 3% of GDP or below. "I see this area, which was viewed as the biggest vulnerability, as very comfortably manageable today," Simsek added.

External financing needs decline

Addressing external financing concerns, Simsek said Türkiye's gross external financing need is expected to stand at around 17% of GDP this year despite war-related disruptions, remaining below its long-term average of approximately 20%. He noted that the deterioration in the annual foreign trade deficit since December has stayed below $1.5 billion despite the oil shock, while tourism revenues have held steady. There is "no room for concern" over reserves, Simsek added, explaining that nearly 40% of the recent reserve decline following the outbreak of war stemmed from changes in gold prices rather than underlying weakness.

Central Bank affirms tight policy stance

Central Bank Governor Fatih Karahan said the monetary authority would continue using all policy tools decisively to protect both price stability and financial stability in the period ahead. "At the point we have reached today, we assess that the necessary conditions for the continuation of the disinflation process have been preserved thanks to our policy tools, strong reserve position and macroeconomic rebalancing," Karahan said. He noted that geopolitical developments and energy market volatility had created short-term risks for inflation and the external balance, but were not expected to reverse the disinflation trajectory if correct policy steps were maintained.

Karahan confirmed that the central bank's tight monetary policy stance would continue, with future decisions considering the effects of geopolitical developments on inflation through cost, economic activity and expectations channels. Rebalancing in domestic demand, a healthy current account outlook and a strong reserve position provide support for the continuation of disinflation, he noted. The path to healthy and sustainable growth in the banking sector runs through low and stable inflation, Karahan added, stating that long-term external financing inflows continued to confirm the resilience of the sector.